The UAE’s non-oil private sector experienced a slowdown in growth during May 2025, reaching its weakest pace in nearly four years. Despite this moderation, the sector maintained a robust expansion throughout early 2025, driven by strong demand and strategic diversification efforts, though competitive pressures and global tariffs presented challenges.
UAE Non-Oil Sector: A Mixed Picture in May
Growth in the UAE’s non-oil private sector decelerated in May 2025, with the S&P Global UAE Purchasing Managers’ Index (PMI) falling to 53.3 from 54.0 in April. This marks the lowest reading since September 2021, indicating a softening momentum. The rate of expansion in output was the slowest in 44 months, and new order growth, while still robust, eased to a seven-month low.
- The PMI remained above the 50.0 threshold, signifying continued expansion.
- Competitive pressures and weaker trade, partly attributed to US tariffs, were cited as contributing factors to the slowdown.
- Businesses streamlined operations, leading to a record decline in inventories.
- Optimism for future output reached its lowest level since January.
Early 2025: A Period of Robust Expansion
Despite the May slowdown, the non-oil sector demonstrated strong performance in the preceding months of 2025:
- January: The PMI stood at 55.0, indicating robust expansion. Business activity and new orders saw sharp increases, supported by favorable market conditions and easing cost pressures. However, capacity pressures persisted, and business confidence was at its lowest since December 2022.
- March: Growth moderated slightly, with the PMI at 54.0, down from 55.0 in February. New order growth slowed for the third consecutive month. Despite this, businesses increased input purchases at the fastest rate since July 2019 to clear backlogs. Employment growth, however, was at its weakest in nearly three years due to recruitment challenges.
- April: Growth held steady, with the PMI remaining at 54.0. Employment saw its fastest rise in 11 months as firms aimed to reduce workloads and support new business. New order growth quickened slightly, driven by the strongest upturn in international demand in five months. Business activity growth, however, slowed to a seven-month low due to payment delays.
Dubai’s Performance
Dubai’s non-oil private sector largely mirrored the broader UAE trends:
- March: The headline PMI fell to a five-month low of 53.2, with new orders rising sharply but at a slower rate, leading to a rare reduction in employment.
- April: The PMI slowed again to 52.9, with the slowest pace of new business growth since October and weakened confidence.
- May: Dubai’s PMI remained steady at 52.9, with demand momentum strengthening and new order growth quickening to a four-month high, indicating a solid expansion in operating conditions.
Outlook and Diversification Efforts
While the May data suggests an easing of momentum, the overall picture for the UAE’s non-oil economy remains positive. The nation’s focus on diversifying its economy into sectors like technology, manufacturing, tourism, trade, and innovation continues to underpin its resilience. The Central Bank projects the UAE’s GDP to expand by 4.7 percent in 2025, with non-oil growth reaching 5.1 percent, and further growth expected in 2026.
Sources
- UAE non-oil business sector growth slows in March, PMI shows, Reuters.
- UAE non-oil business growth slows in May, PMI shows, Reuters.
- UAE non-oil business sector expands robustly in January, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
- UAE non-oil business activity down in May amid tariff pressures, The National.
